Monday, June 28, 2010

How Bad Will It Get?

The London Telegraph's Ambrose Evans-Pritchard is a solid bear. He's been forecasting gloom and doom for years. Now he's writing about the possibility of a double-dip recession provoked by the current Euro crisis.

Investors basking in Wall Street's V-shaped rally had assumed that this bizarre episode was over. So did the Fed, which has been shutting liquidity spigots one by one. But the latest batch of data is disturbing.

Leading indicators seem to be forecasting a US contraction by the end of the year. That means that the Fed will swing back to money printing. An analyst in Europe, Andrew Roberts, forecasts that the Fed will revert to the same policy as it followed during World War II when it printed enough money to keep US Treasury bonds yielding about 2 percent.

Well, of course we don't yet know what is going to happen. The markets clearly aren't sure. They are certainly calling for a very modest expansion from now on.

If there is a double-dip recession in the US we will know who to blame. President Obama and the Democrats. For trashing the credit markets with lunatic housing credit subsidies. For wasting a trillion dollars on stimulating state and local government union workers. For raising taxes in a recession. For burdening the economy with a huge new health care entitlement. For scaring consumers and businesses with lunatic green energy taxes.

It could all end up in a huge political realignment.

But will it be worth the cost? The millions of unemployed. The shattered lives.

What's the point of all this political power and subsidization and preening if it all leads to a massive meltdown as big government shows what a waste it all is?

Frankly, I'd rather have the the foolish President Obama continue in power and the utterly corrupt Democrats in Congress continue in power than subject the American people to another Great Depression.

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